Mexico ruling party routed in regional vote on graft, gang violence

A woman cast her ballot during the election of 60 deputies, to form the Constituent Assembly that will create a constituition for Mexico City, in Mexico City, Mexico, June 5, 2016.Edgard Garrido.

XALAPA, Mexico (Reuters) - Mexico's ruling party lost several bastions in Sunday's regional elections to the center-right opposition, dealing a heavy blow to President Enrique Pena Nieto for failing to crack down on corruption and gang violence.

The rout will help set the tone for the next presidential election in 2018, underscoring deep discontent over graft scandals and a sluggish economy, and throwing the contest open to contenders from both the left and right.

Early results from gubernatorial races in 12 of Mexico's 31 states on Monday showed Pena Nieto's ruling Institutional Revolutionary Party, or PRI, heading for defeat in seven of them, a result far worse than most polls had forecast.

Projected losses included two oil-rich strongholds in the Gulf of Mexico, Veracruz and neighboring Tamaulipas, both of which have been plagued by gang violence for years, as well as Quintana Roo, home to Mexico's top tourist destination Cancun. All three have been run by the PRI for over eight decades.

The center-right National Action Party (PAN) was the big victor in the gubernatorial races, leading in seven states. In three of these contests, it fielded a candidate in alliance with the center-left Party of the Democratic Revolution (PRD)

"If we get results, we're going to win the presidency in 2018," PAN leader Ricardo Anaya told local radio.

The PRI held nine of the 12 states going into the vote, of which the most populous is Veracruz, a region dominated by just a few families since the PRI took control in the decades after Mexico's 1910 revolution.

PRI party boss Manlio Fabio Beltrones, who some had viewed as a potential presidential candidate, struck a contrite tone.

"What we need to do is observe this election, and take on board the electorate's message to the PRI," he said.

With two-thirds of votes counted in Veracruz, the PRI was behind the PAN-PRD contender and just ahead of the unheralded candidate of a new leftist party founded by combative two-time presidential runner-up Andres Manuel Lopez Obrador.

Investors have eyed warily the progress in Veracruz of Lopez Obrador's National Regeneration Movement (Morena), because he has vowed to undo Pena Nieto's historic opening of the oil industry to private investors if he wins in 2018.

Only registered as a party two years ago, Morena won a large chunk of the vote in three states and emerged as the first choice of the left in others.

PAN chairman Anaya was quick to target Lopez Obrador, suggesting he now viewed the leftist firebrand as his party's main rival in the next presidential vote.

"We don't want the option for change to be the destructive populism that Lopez Obrador represents," he said. "I'm convinced that an alternative like that would put Mexico in the same situation Venezuela is now in."

Veracruz, where Morena initially led the vote count on Sunday, became a liability for Pena Nieto after years of gang warfare, mounting debts and allegations of corruption.

Accused by critics of misusing public funds and failing to tackle rampant impunity, outgoing Veracruz Governor Javier Duarte was such a lightning rod for public anger that PRI candidate Hector Yunes was "embarrassed" to be in the same party.

Duarte, who could not seek re-election, has denied wrongdoing. But his six-year term became notorious for the killings of journalists and violent crime.

Few voters in Veracruz state capital Xalapa sought to defend him.

"There's no money, there's no jobs, there's no security for our children," said local teacher Ruth Morales, 52. "This government has only benefited a handful of people."